A landmark court ruling has found that Uber drivers are not self-employed contractors and can be classed as employees.

The employment tribunal ruled that the taxi app drivers are entitled to minimum wage and other benefits.

It was the case of the decade for employment law – pitting the popular lift hailing app company against one of Britain’s most powerful unions in a tribunal case that threatens to shatter the so-called ‘gig economy.’

The ruling isn’t just important for Uber, its drivers and its customers - it could also have more far reaching consequences for other self-employed contractors and their employers.

In this blog post we take a closer look at the case and evaluate some of the potential consequences of the ruling.

What happened?

The case was brought by two Uber drivers from London, backed up by the weight of the GMB union.

In court, the drivers argued that the nature of their work was such that they were effectively employed by Uber – but didn’t receive any basic employment rights like the National Minimum Wage or holiday pay.

They complained that they could be penalised by Uber and were treated like employees – but got none of the perks in return.

One of the drivers complained that he earned a little over £5.00 per hour one month last year.

Uber countered that it was simply a software company using an app to connect self-employed ‘partners’ with people in need of a lift. They charge drivers a referral fee for making the connection, so the drivers are effectively their clients. This, they say, means it doesn’t make sense to pay the drivers a wage.

In an email sent to customers, Uber defended their position.

It says: “A recent poll of 1,000 drivers who use our app found that the overwhelming majority prefer being self-employed and joined Uber precisely because they want to be their own boss.”

They also claim that the average UK driver earns £16 per hour in fares after the company takes its service fee.

The company will challenge the ruling.

Consequences for contractors

The ruling in this case will almost certainly have broader consequences for some companies and their contractors, particularly those that use apps and other digital technology to connect workers and customers.

Courier firms, taxi apps and food delivery companies could all be affected.

This ruling could open the floodgates to a raft of similar cases brought against companies with similar employment practices.

But this case doesn’t set an overarching precedent. As Umbrella.co.uk understands it, each case will be judged individually depending on the specific circumstances.

It is safe to say though that firms working with a high proportion of self-employed workers will be looking at their employment practices carefully in the next few weeks and months.

Some commentators have painted this latest case as part of a broader backlash against the trend of self-employment.

The number of self-employed people in the UK has risen sharply in recent years. Some observers complain that this betrays an underlying weakness in the economy while others argue that more self-employment leaves the door open for companies to mistreat their workers.

Miles Grady, director of Umbrella.co.uk said: “The digital age brings a lot of opportunities for self-employed workers. There are lots of advantages for these workers, particularly those that value the freedom that comes with working for yourself.

“But these benefits need to be balanced against the potential for workers to be exploited. I think that this latest case highlights the fact that current employment law is not fit for purpose in the digital age.”

For more information visit www.umbrella.co.uk or email team@umbrella.co.uk